It may well pay to take a perma-bear reality check

Welcome to the end of prosperity as we know it. Hunker down. Take your children in your arms and press them to your breast. Because this is going to hurt. No one will be spared the pain.

And do not take my word for it. Listen to Albert Edwards, one of the very top-rated investment strategists, who works for Société Généralé, based in London.

"We see a global recession unfolding. Nowhere and nothing will be immune. It looks likely that Japan might join the United Kingdom and the United States in deep recession. The Eurozone data has caused surprise by its weakness. And as the dollar starts its ascent, global liquidity will drain away and crush the 'hope-for-growth' twin emerging-market and commodity bubbles." Get the picture? Here's some more from Edwards: "The global economy is going down and we think it is going to be ugly. The credit crisis is not the cause. It is a symptom of years of grotesque spending excess – most notably in the US and UK household sectors. The economic bubble will take years to adjust, not months. And now, with many of our favoured technical indicators flipping from excess bearishness in January to excess bullishness, it is time to sell and head for the hills."

Edwards is a perma-bear – the financial market equivalent of that strange guy on the street corner with a sign and a loud hailer, warning that the heavens are about to open and the end is nigh.

He is widely derided for his bearish views – but his weekly strategy reports are also widely read because they are written with delicious prose and, crucially, they make people think.

His latest forecast of the end of the financial world, for example, evokes the spectre of A Nightmare on Elm Street: "We are trying to give our readers the strongest possible warning [ever!] that we are on the cusp of an equity meltdown that will slash and shred portfolios like Freddie Krueger."

You might well ask how someone with such a delirious approach to investment advice manages to retain gainful employment in a mainstream investment bank – and it is worth adding here that SocGen's poaching of Edwards last year, from Dresdner Kleinwort, where he had worked for almost 20 years, was seen as something of a coup.

And I would say again that it is because Edwards makes people think.

Behind the pyrotechnical prose is a closely-argued and deeply held belief that such are the global balances that an eventual and inevitable rebalancing will cripple the world's economic engine.

Edwards believes the markets have been lulled into a false state of assurance by recent economic data suggesting the US economy grew rather than shrank in the first quarter and that US employers are actually still creating new jobs rather than shedding workers.

The SocGen man points to the experience of early 2001 when, after the bursting of the dotcom bubble, there were subsequent whoops of delight when US GDP posted an impressive two per cent rate of growth during the first quarter – only for the figure to be revised downwards to minus 0.5 per cent at a later date. Similarly, payroll statistics currently being celebrated in the equity markets include a whole range of assumptions and estimates – and, in any case, are notoriously volatile.

He reckons that all these numbers will be revised down in the future so they look much more like current important confidence surveys, such as the one produced regularly by the US Conference Board.

What is more, Edwards points to an alarming decline in the optimism among those analysts who focus at a company sector level, with reduced earnings forecasts pointing to the fact that corporate profits are disintegrating. He adds that this is clearly evident even outside the financial sector – taking a "whole economy" approach to corporate profits to demonstrate the decline. Is this all a bit overdone? Probably. But Edwards' analysis also serves as a reality check when equity markets seem to be insisting that the near-collapse of Bear Stearns marked the nadir of the crunch.

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